National Mortgage Index August 2017

The UK housing market remained stable in July, with very little change on the previous month as transaction levels and values remained reasonably constant.­­ This was borne out by key indicators from the July data, including:

Average purchase price remained broadly unchanged, with an average increase of £73 month on month

Marginal change in the average remortgage loan with less than a 0.5% increase month on month

Average First Time Buyer property purchase price decreased slightly (0.3%) month on month

Mortgage Advice Bureau data is based upon mortgage applications, therefore this provides a good snapshot of consumer activity in one of traditionally the quieter months of the year.­

The data from July suggests that there has been a slight cooling in prices in some areas and also in some sectors, for example at the entry level of the market with the average First Time Buyer paying less for their homes in July than they did in the previous month, most possibly due to a reduction in competition with investors over the same type of property.­

Where values have cooled month on month in a region, for example East Midlands, East Anglia and the South East, prices are not moving dramatically which should provide reassurance for many.­ Realistically, a downward movement in prices over the last month or so is likely to indicate that those selling are pricing realistically in order to secure a buyer, given that many of those now looking for property are securing their mortgage prior to starting their search and, therefore, have a budget which is not flexible.­­ Mortgage affordability has become more stretched, with the average rise in incomes below that of Consumer Price Inflation, therefore the impact on household income in line with house price rises means that there is a finite limit in terms of what buyers can realistically borrow, and this is more likely to be impacting on any movements in terms of pricing than any other factor currently.

It would also appear that the ongoing impact of “Brexit negotiations” so far do not seem to have dented UK consumers’ confidence in bricks and mortar, and as the Bank of England recently commentated with regards inflation, “...If UK households and businesses look through the flurry of headlines, then the economy can be expected to pick up from its current period of sluggishness.” Certainly, from what we can so far observe, whilst discretionary buyers and sellers may be less prolific than we’ve seen in previous years, those who are actually currently in the transaction cycle are being driven by lifestyle factors which take precedence over any degree of uncertainty around political or economic climate. ­This is further supported by data from HMRC regarding Residential Property Transactions in July, which shows a 1.3% month on month increase and an 8.3% increase year on year.

It’s also interesting to note that the July Halifax House Price Index report indicates that average house prices are currently at 10% above the 2007 August market peak, and 42% higher than the lowest point of the market in April 2009.­­ Of course when we look at these figures, this news will garner mixed reviews from the UK public, as many will be delighted that their long-term property investments are performing so well, but others, particularly First Time Buyers, would possibly see the growth in property prices over the last year or so as yet another challenge to getting on the ladder.­

Whether the current levels of growth in house prices are regarded as positive or negative, the ongoing market factors at play, for example low levels of properties coming to the market for sale combined with increasingly competitive rates being released by lenders and ongoing buyer confidence mean that the fundamentals are in place to sustain the current direction of travel for the UK housing market over the coming months.­ Given that prices are now reaching all-time highs, a subdued level of house price growth for the rest of 2017 may not be such a bad thing; ­we don’t need prices to run out of control to the extent that it triggers a market correction, and prices do need to remain at a level whereby First Time Buyers, who underpin the rest of the market, are able to afford to purchase in order to ensure that the rest of the property market ecosystem continues to function.

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